Rule Change: Open
Overview
The Australian Energy Market Commission (AEMC) is considering options to improve market arrangements for security services in response to rule change requests from Hydro Tasmania and Delta Electricity.
Essential system services (ESS) are critical to maintaining overall power system security by meeting core power system requirements.
Given the current transition to a new operating environment with exiting synchronous generation and increasing penetration of inverter-based resources such as wind, solar and batteries, the Australian Energy Market Operator (AEMO) is regularly intervening to direct generators to provide system security, to make sure the market is operated securely.
The Improving Security Frameworks for the Energy Transition rule change process is considering options that would improve arrangements for maintaining security of the power system, both today and across the transition.
Supporting the power system through the transition
We released an update paper in December 2023 seeking feedback on:
- further refinements to the ‘transitional services framework’ proposed in the directions paper, and
- a new proposed report: the transition plan for system security.
These proposals respond to significant stakeholder feedback on the transitional services framework in submissions to the directions paper.
Prior to this, the Commission released a draft determination for this project in late 2022 outlining a design for a new tool that would allow AEMO to procure, schedule and optimise system security services in operational timeframes. More information on the design of the Operational security mechanism (OSM) previously proposed by the AEMC can be found in the draft determination below.
After carefully considering the proposed approach in the draft determination and stakeholder feedback to date, the Commission came to the view that there are simpler and more immediate solutions available to address the problem compared with an OSM as set out in the draft determination. We renamed this rule change from ‘Operational security mechanism to ‘Improving security frameworks for the energy transition’ to reflect this revised approach.
The Commission released a directions paper in August 2023, including proposed rule drafting, proposing five key areas of reform to address security needs through the transition in a simpler way:
- aligning the inertia and system strength frameworks
- removing the exclusion to procuring inertia network services and system strength in the NSCAS framework
- empowering AEMO to enable (or ‘schedule’) security services with a whole-of-NEM perspective
- improving directions transparency and compensation
- creating a new transitional non-market ancillary services (NMAS) framework for AEMO to procure security services necessary for the energy transition
We will continue to consult with stakeholders through further meetings and Technical Working Groups (TWGs) for key elements of the proposal, noting that the issue of directions compensation will now be considered through the Review into electricity compensation frameworks.
In November 2023, the Commission extended the final determination publication date to 28 March 2024 to allow for further consultation with stakeholders on the revised approach.
Overview of the rule change process
Hydro Tasmania’s rule change request, received 19 November 2019, proposed an approach where system services would be procured within the spot market and the need for system services would be determined by binding constraints. This would involve the creation of a “synchronous services market” which would be integrated with the existing energy and FCAS spot markets.
Delta Electricity’s rule change request, received on 4 June 2020, proposed an approach where system services would be scheduled ahead of time outside of the spot market. System needs would be identified through the short term project assessment of system adequacy.
The Hydro Tasmania and Delta Electricity rule change requests were consolidated on 2 February 2022, pursuant to section 93 of the NEL, under the name “Operational security mechanism” (ERC0290). The AEMC decided to consolidate its consideration of the rule change requests because both identify the need for new arrangements to schedule and procure essential system services as the proportion of variable renewable energy (VRE) increases.
Key dates for this rule change
Rule change request received (ERC0290) – 19 November 2019
Rule change request received (ERC0306) – 2 July 2020
Consultation paper published – 17 July 2020
Submissions due – 13 August 2020
Directions paper published – 9 September 2021
Submissions due – 21 October 2021
Rule change requests consolidated pursuant to s93 of the NEL – 2 February 2022
Draft determination and rule published – 21 September 2022
Submissions due – 17 November 2022
s107 extension of time granted to publish draft determination and rule (due to complexity of issues) – 24 September 2020, 9 March 2021, 17 June 2021, 24 November 2021, 22 June 2022, 25 August 2022
s108A report published giving reasoning for a rule not being made within a year of initiation – 17 June 2021
Directions paper published – 24 August 2023
Submissions due – 28 September 2023
Transitional services update paper published – 14 December 2023
Submissions due – 1 February 2024
s107 extension of time granted to publish final determination and rule (due to complexity and difficulty of issues raised by stakeholder submissions to draft determination) – 22 December 2022, 25 May 2023, 1 November 2023
Final determination and rule expected completion – 28 March 2024